A taxpayer may elect to treat the cost of any section
179 property as an expense which is not chargeable to capital account. Any cost so treated shall be allowed as a deduction for the taxable year in which the section
179 property is placed in service.

(b) Limitations

(1) Dollar limitation

The aggregate cost which may be taken into account under subsection (a) for any taxable year shall not exceed—

(A)$250,000 in the case of taxable years beginning after 2007 and before 2010,

(B)$500,000 in the case of taxable years beginning in 2010, 2011, 2012, or 2013, and

(C)$25,000 in the case of taxable years beginning after 2013.

(2) Reduction in limitation

The limitation under paragraph (1) for any taxable year shall be reduced (but not below zero) by the amount by which the cost of section
179 property placed in service during such taxable year exceeds—

(A)$800,000 in the case of taxable years beginning after 2007 and before 2010,

(B)$2,000,000 in the case of taxable years beginning in 2010, 2011, 2012, or 2013, and

(C)$200,000 in the case of taxable years beginning after 2013.

(3) Limitation based on income from trade or business

(A) In general

The amount allowed as a deduction under subsection (a) for any taxable year (determined after the application of paragraphs (1) and (2)) shall not exceed the aggregate amount of taxable income of the taxpayer for such taxable year which is derived from the active conduct by the taxpayer of any trade or business during such taxable year.

(B) Carryover of disallowed deduction

The amount allowable as a deduction under subsection (a) for any taxable year shall be increased by the lesser of—

(i)the aggregate amount disallowed under subparagraph (A) for all prior taxable years (to the extent not previously allowed as a deduction by reason of this subparagraph), or

(ii)the excess (if any) of—

(I)the limitation of paragraphs (1) and (2) (or if lesser, the aggregate amount of taxable income referred to in subparagraph (A)), over

(II)the amount allowable as a deduction under subsection (a) for such taxable year without regard to this subparagraph.

(C) Computation of taxable income

For purposes of this paragraph, taxable income derived from the conduct of a trade or business shall be computed without regard to the deduction allowable under this section.

(4) Married individuals filing separately

In the case of a husband and wife filing separate returns for the taxable year—

(A)such individuals shall be treated as 1 taxpayer for purposes of paragraphs (1) and (2), and

(B)unless such individuals elect otherwise, 50 percent of the cost which may be taken into account under subsection (a) for such taxable year (before application of paragraph (3)) shall be allocated to each such individual.

(5) Limitation on cost taken into account for certain passenger vehicles

(A) In general

The cost of any sport utility vehicle for any taxable year which may be taken into account under this section shall not exceed $25,000.

(B) Sport utility vehicle

For purposes of subparagraph (A)—

(i)In general
The term “sport utility vehicle” means any 4-wheeled vehicle—

(I)which is primarily designed or which can be used to carry passengers over public streets, roads, or highways (except any vehicle operated exclusively on a rail or rails),

(III)which is rated at not more than 14,000 pounds gross vehicle weight.

(ii)Certain vehicles excluded
Such term does not include any vehicle which—

(I)is designed to have a seating capacity of more than 9 persons behind the driver’s seat,

(II)is equipped with a cargo area of at least 6 feet in interior length which is an open area or is designed for use as an open area but is enclosed by a cap and is not readily accessible directly from the passenger compartment, or

(III)has an integral enclosure, fully enclosing the driver compartment and load carrying device, does not have seating rearward of the driver’s seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield.

(c) Election

(1) In general

An election under this section for any taxable year shall—

(A)specify the items of section
179 property to which the election applies and the portion of the cost of each of such items which is to be taken into account under subsection (a), and

(B)be made on the taxpayer’s return of the tax imposed by this chapter for the taxable year.

Such election shall be made in such manner as the Secretary may by regulations prescribe.

(2) Election irrevocable

Any election made under this section, and any specification contained in any such election, may not be revoked except with the consent of the Secretary. Any such election or specification with respect to any taxable year beginning after 2002 and before 2014 may be revoked by the taxpayer with respect to any property, and such revocation, once made, shall be irrevocable.

(d) Definitions and special rules

(1) Section
179 property

For purposes of this section, the term “section
179 property” means property—

(ii)computer software (as defined in section
197(e)(3)(B)) which is described in section
197(e)(3)(A)(i), to which section
167 applies, and which is placed in service in a taxable year beginning after 2002 and before 2014,

(C)which is acquired by purchase for use in the active conduct of a trade or business.

Such term shall not include any property described in section
50(b) and shall not include air conditioning or heating units.

(2) Purchase defined

For purposes of paragraph (1), the term “purchase” means any acquisition of property, but only if—

(A)the property is not acquired from a person whose relationship to the person acquiring it would result in the disallowance of losses under section
267 or
707(b) (but, in applying section
267(b) and (c) for purposes of this section, paragraph (4) of section
267(c) shall be treated as providing that the family of an individual shall include only his spouse, ancestors, and lineal descendants),

(B)the property is not acquired by one component member of a controlled group from another component member of the same controlled group, and

(C)the basis of the property in the hands of the person acquiring it is not determined—

(i)in whole or in part by reference to the adjusted basis of such property in the hands of the person from whom acquired, or

(ii)under section
1014(a) (relating to property acquired from a decedent).

(3) Cost

For purposes of this section, the cost of property does not include so much of the basis of such property as is determined by reference to the basis of other property held at any time by the person acquiring such property.

(4) Section not to apply to estates and trusts

This section shall not apply to estates and trusts.

(5) Section not to apply to certain noncorporate lessors

This section shall not apply to any section
179 property which is purchased by a person who is not a corporation and with respect to which such person is the lessor unless—

(A)the property subject to the lease has been manufactured or produced by the lessor, or

(B)the term of the lease (taking into account options to renew) is less than 50 percent of the class life of the property (as defined in section
168(i)(1)), and for the period consisting of the first 12 months after the date on which the property is transferred to the lessee the sum of the deductions with respect to such property which are allowable to the lessor solely by reason of section
162 (other than rents and reimbursed amounts with respect to such property) exceeds 15 percent of the rental income produced by such property.

(6) Dollar limitation of controlled group

For purposes of subsection (b) of this section—

(A)all component members of a controlled group shall be treated as one taxpayer, and

(B)the Secretary shall apportion the dollar limitation contained in subsection (b)(1) among the component members of such controlled group in such manner as he shall by regulations prescribe.

(7) Controlled group defined

For purposes of paragraphs (2) and (6), the term “controlled group” has the meaning assigned to it by section
1563(a), except that, for such purposes, the phrase “more than 50 percent” shall be substituted for the phrase “at least 80 percent” each place it appears in section
1563(a)(1).

(8) Treatment of partnerships and S corporations

In the case of a partnership, the limitations of subsection (b) shall apply with respect to the partnership and with respect to each partner. A similar rule shall apply in the case of an S corporation and its shareholders.

(9) Coordination with section
38

No credit shall be allowed under section
38 with respect to any amount for which a deduction is allowed under subsection (a).

(10) Recapture in certain cases

The Secretary shall, by regulations, provide for recapturing the benefit under any deduction allowable under subsection (a) with respect to any property which is not used predominantly in a trade or business at any time.

(e) Special rules for qualified disaster assistance property

(1) In general

For purposes of this section—

(A)the dollar amount in effect under subsection (b)(1) for the taxable year shall be increased by the lesser of—

(i)$100,000, or

(ii)the cost of qualified section
179 disaster assistance property placed in service during the taxable year, and

(B)the dollar amount in effect under subsection (b)(2) for the taxable year shall be increased by the lesser of—

(i)$600,000, or

(ii)the cost of qualified section
179 disaster assistance property placed in service during the taxable year.

For purposes of sections
1397A and
1400J, qualified section
179 disaster assistance property shall not be treated as qualified zone property or qualified renewal property, unless the taxpayer elects not to take such qualified section
179 disaster assistance property into account for purposes of this subsection.

(4) Recapture

For purposes of this subsection, rules similar to the rules under subsection (d)(10) shall apply with respect to any qualified section
179 disaster assistance property which ceases to be qualified section
179 disaster assistance property.

(f) Special rules for qualified real property

(1) In general

If a taxpayer elects the application of this subsection for any taxable year beginning in 2010, 2011, 2012, or 2013, the term “section
179 property” shall include any qualified real property which is—

(A)of a character subject to an allowance for depreciation,

(B)acquired by purchase for use in the active conduct of a trade or business, and

(C)not described in the last sentence of subsection (d)(1).

(2) Qualified real property

For purposes of this subsection, the term “qualified real property” means—

For purposes of applying the limitation under subsection (b)(1)(B), not more than $250,000 of the aggregate cost which is taken into account under subsection (a) for any taxable year may be attributable to qualified real property.

(4) Carryover limitation

(A) In general

Notwithstanding subsection (b)(3)(B), no amount attributable to qualified real property may be carried over to a taxable year beginning after 2013.

(B) Treatment of disallowed amounts

Except as provided in subparagraph (C), to the extent that any amount is not allowed to be carried over to a taxable year beginning after 2013 by reason of subparagraph (A), this title shall be applied as if no election under this section had been made with respect to such amount.

(C) Amounts carried over from 2010, 2011 and 2012

If subparagraph (B) applies to any amount (or portion of an amount) which is carried over from a taxable year other than the taxpayer’s last taxable year beginning in 2013, such amount (or portion of an amount) shall be treated for purposes of this title as attributable to property placed in service on the first day of the taxpayer’s last taxable year beginning in 2013. For the last taxable year beginning in 2013, the amount determined under subsection (b)(3)(A) for such taxable year shall be determined without regard to this paragraph.

(D) Allocation of amounts

For purposes of applying this paragraph and subsection (b)(3)(B) to any taxable year, the amount which is disallowed under subsection (b)(3)(A) for such taxable year which is attributed to qualified real property shall be the amount which bears the same ratio to the total amount so disallowed as—

(i)the aggregate amount attributable to qualified real property placed in service during such taxable year, increased by the portion of any amount carried over to such taxable year from a prior taxable year which is attributable to such property, bears to

(ii)the total amount of section
179 property placed in service during such taxable year, increased by the aggregate amount carried over to such taxable year from any prior taxable year.

For purposes of the preceding sentence, only section
179 property with respect to which an election was made under subsection (c)(1) (determined without regard to subparagraph (B) of this paragraph) shall be taken into account.

Subsec. (f)(4)(C). Pub. L. 112–240, § 315(d)(2)(B), substituted “2010, 2011 and 2012” for “2010” in heading and inserted at end “For the last taxable year beginning in 2013, the amount determined under subsection (b)(3)(A) for such taxable year shall be determined without regard to this paragraph.”

2010—Subsec. (b)(1). Pub. L. 111–240, § 2021(a)(1), substituted “shall not exceed—” for “shall not exceed $25,000 ($250,000 in the case of taxable years beginning after 2007 and before 2011).” and added subpars. (A) to (C).

Pub. L. 111–147, § 201(a)(1), substituted “($250,000 in the case of taxable years beginning after 2007 and before 2011)” for “($125,000 in the case of taxable years beginning after 2006 and before 2011)”.

Subsec. (b)(1)(C), (D). Pub. L. 111–312, § 402(a), added subpars. (C) and (D) and struck out former subpar. (C), which read as follows: “$25,000 in the case of taxable years beginning after 2011.”

Subsec. (b)(2). Pub. L. 111–240, § 2021(a)(2), substituted “exceeds—” for “exceeds $200,000 ($800,000 in the case of taxable years beginning after 2007 and before 2011).” and added subpars. (A) to (C).

Pub. L. 111–147, § 201(a)(2), substituted “($800,000 in the case of taxable years beginning after 2007 and before 2011)” for “($500,000 in the case of taxable years beginning after 2006 and before 2011)”.

Subsec. (b)(2)(C), (D). Pub. L. 111–312, § 402(b), added subpars. (C) and (D) and struck out former subpar. (C), which read as follows: “$200,000 in the case of taxable years beginning after 2011.”

2007—Subsec. (b)(1). Pub. L. 110–28, § 8212(a), (b)(1), substituted “$125,000 in the case of taxable years beginning after 2006” for “$100,000 in the case of taxable years beginning after 2002” and “2011” for “2010”.

Subsec. (b)(2). Pub. L. 110–28, § 8212(a), (b)(2), substituted “$500,000 in the case of taxable years beginning after 2006” for “$400,000 in the case of taxable years beginning after 2002” and “2011” for “2010”.

2003—Subsec. (b)(1). Pub. L. 108–27, § 202(a), reenacted heading without change and amended text generally. Prior to amendment, par. (1) contained a table specifying the maximum amounts for taxable years 1997 to 2003 and thereafter which could be taken into account as the aggregate costs under subsec. (a).

Subsec. (b)(2). Pub. L. 108–27, § 202(b), inserted “($400,000 in the case of taxable years beginning after 2002 and before 2006)” after “$200,000”.

Subsec. (c)(2). Pub. L. 108–27, § 202(e), inserted at end “Any such election or specification with respect to any taxable year beginning after 2002 and before 2006 may be revoked by the taxpayer with respect to any property, and such revocation, once made, shall be irrevocable.”

Subsec. (d)(1). Pub. L. 108–27, § 202(c), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “For purposes of this section, the term ‘section
179 property’ means any tangible property (to which section
168 applies) which is section
1245 property (as defined in section
1245(a)(3)) and which is acquired by purchase for use in the active conduct of a trade or business. Such term shall not include any property described in section
50(b) and shall not include air conditioning or heating units.”

1996—Subsec. (b)(1). Pub. L. 104–188, § 1111(a), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “The aggregate cost which may be taken into account under subsection (a) for any taxable year shall not exceed $17,500.”

Subsec. (d)(5). Pub. L. 101–508, § 11813(b)(11)(B), amended par. (5) generally. Prior to amendment, par. (5) read as follows: “This section shall not apply to any section
179 property purchased by any person described in section
46(e)(3) unless the credit under section
38 is allowable with respect to such person for such property (determined without regard to this section).”

“(A) In general.—The aggregate cost of section
179 property taken into account under subsection (a) for any taxable year shall not exceed the aggregate amount of taxable income of the taxpayer for such taxable year which is derived from the active conduct by the taxpayer of any trade or business during such taxable year.

“(B) Carryover of unused cost.—The amount of any cost which (but for subparagraph (A)) would have been allowed as a deduction under subsection (a) for any taxable year shall be carried to the succeeding taxable year and added to the amount allowable as a deduction under subsection (a) for such succeeding taxable year.

“(C) Computation of taxable income.—For purposes of this paragraph, taxable income derived from the conduct of a trade or business shall be computed without regard to the cost of any section
179 property.”

1986—Subsec. (b). Pub. L. 99–514, § 202(a), in amending subsec. (b) generally, substituted “Limitations” for “Dollar limitation” in heading, in par. (1) substituted as heading “Dollar limitation” for “In general” and in text “shall not exceed $10,000” for “shall not exceed the following applicable amount:” and a table specifying amounts for specific years, added pars. (2) to (4), and struck out former par. (2) which read as follows: “In the case of a husband and wife filing separate returns for a taxable year, the applicable amount under paragraph (1) shall be equal to 50 percent of the amount otherwise determined under paragraph (1).”

Subsec. (d)(8). Pub. L. 99–514, § 201(d)(3), substituted “Treatment of” for “Dollar limitation in case of” in heading and amended text generally. Prior to amendment, text read as follows: “In the case of a partnership, the dollar limitation contained in subsection (b)(1) shall apply with respect to the partnership and with respect to each partner. A similar rule shall apply in the case of an S corporation and its shareholders.”

Subsec. (d)(10). Pub. L. 99–514, § 202(c), struck out “before the close of the second taxable year following the taxable year in which it is placed in service by the taxpayer” after “at any time”.

1984—Subsec. (b)(1). Pub. L. 98–369amended table by dropping items setting applicable amounts of $0 for 1981 and $5,000 for 1982, substituting an applicable amount of $5,000 for 1983, 1984, 1985, 1986, and 1987 for former table items which had set applicable amounts of $5,000 for 1983, $7,500 for 1984, $7,500 for 1985, and $10,000 for 1986 or thereafter, and added items setting applicable amounts of $7,500 for 1988 or 1989, and $10,000 for 1990 or thereafter.

1982—Subsec. (d)(8). Pub. L. 97–354substituted “partnerships and S corporations” for “partnerships” in heading, and inserted “A similar rule shall apply in the case of an S corporation and its shareholders.”

1981—Pub. L. 97–34amended section generally, changing its content from provisions that formerly made available an additional first-year depreciation allowance for small businesses to provisions allowing a taxpayer to elect to treat the cost of section
179 property as an expense which is not chargeable to capital account, with any cost so treated to be allowed as a deduction for the taxable year in which the section
179 property is placed in service.

1969—Subsec. (d). Pub. L. 91–172substituted reference to component members of a controlled group for reference to members of an affiliated group in pars. (2)(B) and (b), and substituted definition of controlled group for definition of affiliated group in par. (7).

“(1) In general.—Except as provided in paragraph (2), the amendments made by this section [amending this section] shall apply to property placed in service after December 31, 2009, in taxable years beginning after such date.

“(2) Extensions.—The amendments made by subsections (c) and (d) shall apply to taxable years beginning after December 31, 2010.”

Pub. L. 108–357, title VIII, § 910(b),Oct. 22, 2004, 118 Stat. 1660, provided that: “The amendment made by this section [amending this section] shall apply to property placed in service after the date of the enactment of this Act [Oct. 22, 2004].”

Amendment by section 1702(h)(10), (19) ofPub. L. 104–188effective, except as otherwise expressly provided, as if included in the provision of the Revenue Reconciliation Act of 1990, Pub. L. 101–508, title XI, to which such amendment relates, see section 1702(i) ofPub. L. 104–188, set out as a note under section
38 of this title.

Amendment by Pub. L. 101–508applicable to property placed in service after Dec. 31, 1990, but not applicable to any transition property (as defined in section
49(e) of this title), any property with respect to which qualified progress expenditures were previously taken into account under section
46(d) of this title, and any property described in section
46(b)(2)(C) of this title, as such sections were in effect on Nov. 4, 1990, see section 11813(c) ofPub. L. 101–508, set out as a note under section
45K of this title.

Effective Date of 1988 Amendment

Amendment by Pub. L. 100–647effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) ofPub. L. 100–647, set out as a note under section
1 of this title.

Effective Date of 1986 Amendment

Amendment by section 201(d)(3) ofPub. L. 99–514applicable to property placed in service after Dec. 31, 1986, in taxable years ending after such date, with exceptions, see sections 203 and 204 ofPub. L. 99–514, set out as a note under section
168 of this title.

Amendment by section 201(d)(3) ofPub. L. 99–514not applicable to any property placed in service before Jan. 1, 1994, if such property placed in service as part of specified rehabilitations, and not applicable to certain additional rehabilitations, see section 251(d)(2), (3) ofPub. L. 99–514, set out as a note under section
46 of this title.

Effective Date of 1984 Amendment

Amendment by Pub. L. 98–369applicable to taxable years ending after Dec. 31, 1983, see section 18(a) ofPub. L. 98–369, set out as a note under section
48 of this title.

Effective Date of 1983 Amendment

Amendment by Pub. L. 97–448effective, except as otherwise provided, as if it had been included in the provision of the Economic Recovery Tax Act of 1981, Pub. L. 97–34, to which such amendment relates, see section 109 ofPub. L. 97–448, set out as a note under section
1 of this title.

Effective Date of 1982 Amendment

Amendment by Pub. L. 97–354applicable to taxable years beginning after Dec. 31, 1982, see section 6(a) ofPub. L. 97–354, set out as an Effective Date note under section
1361 of this title.

Effective Date of 1981 Amendment

Amendment by Pub. L. 97–34applicable to property placed in service after Dec. 31, 1980, in taxable years ending after that date, see section 209(a) ofPub. L. 97–34, set out as an Effective Date note under section
168 of this title.

Effective Date of 1976 Amendment

Amendment by section 213(a) ofPub. L. 94–455applicable in the case of partnership taxable years beginning after Dec. 31, 1975, see section 213(f) ofPub. L. 94–455, set out as an Effective Date note under section
709 of this title.

Effective Date of 1969 Amendment

Amendment by Pub. L. 91–172applicable with respect to taxable years ending on or after Dec. 31, 1970, see section 401(h)(3) ofPub. L. 91–172, set out as a note under section
1561 of this title.

Effective Date of 1962 Amendment

Amendment by Pub. L. 87–834applicable to taxable years beginning after Dec. 31, 1961, and ending after Oct. 16, 1962, see section 13(g) ofPub. L. 87–834, set out as an Effective Date note under section
1245 of this title.

For provisions that nothing in amendment by Pub. L. 101–508be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(b) ofPub. L. 101–508, set out as a note under section
45K of this title.

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